Aust market lower ahead of US Fed decision

Trevor Chappell
(Australian Associated Press)


The Australian share market has closed lower as investors await a decision overnight on interest rates from the US Federal Reserve, and also the European Central Bank.

The benchmark S&P/ASX200 ended Tuesday down 30.9 points, or 0.51 per cent, at 6,023.5 points, while the broader All Ordinaries index was down 31.7 points, or 0.51 per cent, at 6,133.1 points.

InvestSMART chief market strategist Evan Lucas said investors are waiting to see economic data from the Europe and the US, and the decision on interest rates from the US Federal Reserve.

“I’m very much waiting to see what happens for the rest of the week with the European Central Bank and how they see growth in the European Union,” Mr Lucas said.

“And there’s the Fed (US Federal Reserve decision) to come.”

The US central bank is expected to lift its key interest rate when it makes its announcement in the early hours of Thursday, Australian eastern time, but analysts expect the accompanying statement will be more influential.

Mr Lucas said the US economy continues to strengthen and even though the Fed has lifted interest rates quite dramatically over the past couple of years, it may bring forward some of the interest rate hikes that it had expected to make in 2019 and 2020.

The European Central Bank makes its rate decision soon after the Fed.

Mr Lucas said that on the local market on Wednesday, the big banks were lower as investors worry that credit growth is likely to ease.

National Australia Bank fell 0.8 per cent to $26.14, Commonwealth Bank dropped 1.0 per cent to $68.18, ANZ eased 0.8 per cent to $26.34, and Westpac backtracked 0.3 per cent to $27.43.

In the mining sector, BHP Billiton lost 1.3 per cent to $33.25 and Rio Tinto dumped 1.2 per cent to $84.11 as a stronger US dollar weighed upon copper prices and the recent G7 meeting in Canada raised trade tensions between the US and other members.

Takeover target Atlas Iron added 0.25 cents, or 5.9 per cent, to 4.45 cents after Gina Rinehart’s Hancock Prospecting took a near-20 per cent stake in the junior miner, just days after a similar move by Andrew Forrest’s Fortescue Metals Group.

Atlas in April recommended that its shareholders back a $280 million takeover offer from Mineral Resources, whose shares were down 89 cents, or 5.1 per cent, to $16.40.

In the utilities sector, gas network operator APA Group soared $1.73, or 20.9 per cent, to $10.00.

Australia’s biggest gas pipeline company has received an indicative $13 billion takeover bid from a Chinese consortium led by CK Infrastructure Holdings.

Meanwhile, the Australian dollar was slightly weaker against its US counterpart.

Mr Lucas said the 10-year bond rate in Australia was lower than the 10-year bond rate in the US and the differential is expected to widen.

“That means it is much more attractive to invest in the US than it is here and that means selling the Aussie dollar and buying the US dollar,” Mr Lucas said.

The Aussie was trading at 75.69 US cents at 1700 AEST on Wednesday, from 76.10 US cents on Tuesday.


* The benchmark S&P/ASX200 closed down 30.9 points, or 0.51 per cent, at 6,023.5 points

* The broader All Ordinaries index was down 31.7 points, or 0.51 per cent, at 6,133.1 points

* The SPI200 futures contract was down 29 points, or 0.48 per cent, at 6,026 points

* National turnover was 3.4 billion securities traded worth $5.9 billion


One Australian dollar buys:

* 75.69 US cents, from 76.10 on Tuesday

* 83.70 Japanese yen, from 83.96 yen

* 64.46 euro cents, from 64.67 euro cents

* 56.67 British pence, from 57.00 pence

* 108.04 NZ cents, from 108.22 cents


The spot price of gold in Sydney at 0700 AEST was $US1,294.67 per fine ounce, from $US1,297.65 per fine ounce on Tuesday.


* CGS 5.75 per cent May 2021, 2.1715pct

* CGS 2.25pct May 2028, 2.7768pct

Sydney Futures Exchange prices:

* September 2018 10-year bond futures contract at 97.21 (implying a yield of 2.79pct), from 97.1825 (implying a yield of 2.8175pct)

* September 2018 3-year bond futures contract at 97.8 (2.2pct), from 97.78 (2.22pct).

(*Bond market closes taken at 1630 AEST previous local session; currency closes taken from 1700 AEST previous local session)

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